Under the increasingly competitive domestic retail environment, retailers are making great efforts to achieve their goal of maximizing profits. In order to maximize the profit of the retailer in this way, the product assortment planning based on the cross effects between the product categories and the individual effects of all the product categories carried by the retailer should be implemented. However, previous studies have concentrated on the effect of sales on individual product categories of retailers, and there is insufficient research on cross-category effects among product categories. In other words, until now, there has been little research to implement an effective product assortment planning.
Therefore, this study divides all product categories handled by retailers into three types of product categories based on the network structure and classifies them into three types of product categories, namely network characteristics(degree centrality, density, and betweenness centrality)(Study 1). The results of this study are as follows. In addition, we tried to test the effects of cross-effects, marketing activities, and shopping tendencies on the size of the basket size by hypothesis (Study 2).
In the study 1, product categories of retail stores were classified into dominant category, mediated category, dependent category according to in-store purchase behavior and network characteristics. The effect of these product category types on the shoppers’ basket size was examined by using the network characteristics index such as out degree and in degree centrality, density, and betweenness centrality as moderating variables. In other words, the out degree and in degree centrality, density, and betweenness centrality values of each product category were divided into high and low groups based on the median, and the difference in influence on the basket size was confirmed by hypothesis.
The results of the hypothesis test of Study 1 are summarized as follows.
First, all product categories handled by retailers were classified into three types according to shoppers’ shopping behavior and network characteristics between product categories: dominant category, dependent category, and mediated category.
The network characteristics(out degree centrality, in degree centrality, density, and betweenness centrality) were tested as moderating variables on the influence of the three types of product categories classified as such on the basket size. As a result, in the case of the dominant category, there was no difference in influence on the basket size according to the level of out degree centrality(high and low), and in the case of the dependant in degree centrality level(high and low), there is no difference in influence. On the other hand, the betweenness centrality level(high, low) of the mediated category showed a difference in influence on the size of the basket size. Also, the density levels(high, low) were found to have different impacts on the basket size in all product category types.
The results of Study 1 show that increasing the number of product categories of retail stores and increasing the size of product assortment are not effective. In other words, it may be effective to increase the network connectivity of existing product categories rather than to increase the number of product categories. The network connectivity of the product category can be viewed as the density, which means that if the connection density of the product category are handling is low, the connection purchase between each product category is weak. The role of the mediated category is also very important here. This is because the mediated category is responsible for improving the connectivity between product categories.
In Study 2, we tried to verify whether there are cross-effects among three types of product categories, and whether the cross-effects, marketing activities, and shopping tendency influences the basket size.
The results of the hypothesis test of Study 2 are summarized as follows.
The cross-effects between the three product categories(dominant, dependent, and mediated) classified in Study 1 were found to exist in the dominant and mediated categories. On the other hand, dependent categories are more likely to be purchased by shoppers with marketing activities such as price discounts and promotional activities and information seeking shopping tendencies rather than cross-effects.
As a result of examining the effect of shoppers’ basket size, dominant category, dependent category, and mediated category showed positive(+) influence on basket size, and cross-effect between dominant category and mediated category positively(+) influence on the basket size. In addition, the price discount of the dependent category and the mediated category with unplanned purchase characteristics showed a positive(+) effect on the basket size, but the promotional activities showed no effect.
The results of Study 2 show that cross-effects between product categories play a role in increasing basket size. In addition, price discounts of dependent and mediated categories play a major role in increasing the size of basket size.
The theoretical implications of this study are threefold. First, this study is based on the study of all product categories handled by retailers by applying network analysis method unlike previous studies. Second, the scope of cross-effect studies between product categories is expanded from previous cross-category effects studies. Third, by identifying the mutual influences of each product category purchased through the surveys at retail stores, it is possible to obtain realistic results that match the purchasing situation of actual consumers.
In addition, the implications of this study based on network analysis between retail product categories can be presented as follows.
First, purchases of the dominant category type are caused by the preplanning plan before visiting the store, so it is common to purchase only the planned products. Therefore, retailers need to establish and implement strategies to prevent consumers from purchasing only planned products. Second, the mediated category type is increasing the basket size through the cross-effect with the dominant category. So, in retail stores, the management of dominant and mediated categories is strategically important. Third, the dependent category has the characteristics of unplanned purchasing, which is caused by response to marketing stimuli, such as price discount, rather than cross-category effects. Thus, it would be effective for retailers to expose marketing stimuli related to dependent categories to mobile lines for dominant or mediated category purchases to increase sales of dependent categories. Fourth, in retail stores, increasing the number of product categories is ineffective in improving retail performance. In other words, increasing the number of product categories to increase the product assortment size does not increase retail performance, but rather increases the network connectivity among the product categories of the retail store. To do so, it is necessary to focus on the management of the mediated category that links the dominant and dependent categories.